$3,000 Cash for Caulkers Details Revealed

by Darwin on March 2, 2010

Cash for Caulkers has been rumored to be coming for some time now, but this week, the administration finally unveiled more details on the rebate plan meant to further stimulate the economy. Following the much maligned and fraud-ridden new home buyer tax credits, cash for clunkers and the impending cash for appliances programs, the administration has formally released details of “cash for caulkers“. Regardless of whether you think one-time jobs such as home upgrades and weather-proofing have any discernible long-term employment benefit for this country, homeowners interested in pursuing these initiatives for their own energy efficiency efforts might as well participate in the program.

Cash for Caulkers Tax Deduction Rules:

Consumers would be eligible for between $1,000 and $1,500 for simple home upgrades such as insulation, duct sealing, water heaters, air conditioning units, windows, roofing and doors.

Homeowners looking for more comprehensive energy retrofits would be eligible for a $3,000 rebate if the efficiency measures lead to a 20 percent energy savings.

According to Obama, these rebates would come instantly from the hardware store, from the contractor

There will be limits of course, but these details still need to be worked out in Congress

Estimates surmise 2-3 Million households will participate

The program is envisioned to cost $23 Billion over 2 years, with $3 Billion set aside for retailers and contractors to promote it, similar to cash for clunkers and dealers.

With basic energy savings tips including a home thermostat and piping insulation, more expensive and complex jobs include energy audits, more extensive insulation, and heating equipment. There is certainly no shortage of ideas and improvements that the typical American household could implement to improve energy efficiency. There is a question of course, over the efficiency of the program itself as currently envisioned.

From a conceptual standpoint, it sounds great to reduce energy costs and energy consumption in the US. After all, we’re sending money to countries that are set on our demise whenever we import oil. High energy prices contribute to inflation, increase our trade deficit and shift money away from other stuff we could be buying to stimulate the economy since Americans don’t save. However, whenever the government tries to solve a problem with a hastily planned program, it’s wrought with waste and fraud and the net outcome is generally a horribly inefficient use of funds and unintended consequences which are never fully understood until the program has run its course.

Take the cash for clunkers program: While it stimulated buyers to trade in older cars for new ones, the American taxpayer paid $24,000 per vehicle to execute the program – what a horrible use of funds! Other initiatives could have distributed funds much more efficiently with both a better ROI and a more widely spread benefit. This was just another case of the government rewarding people for bad behavior at the expense of those with good behavior (those of use that already had fuel-efficient cars and didn’t have a clunker to trade in for a massive discount).

An invite for fraud? Based on what we saw in the new home buyer tax credit, in looking at the sheer number of taxpayers that have already fraudulently claimed the new home buyer tax credit on their returns without even qualifying, it will certainly be a challenge for the administration to put ample safeguards in place to prevent taxpayer/contractor fraud in this program.

At What Cost? What we’ve been seeing with the bailouts and cash-for-whatever programs is that once a program runs out of money or an automaker/AIG says “we need more”, even though the initial legislation was tied to an initial amount, that agreed sum immediately goes out the window and is extended for some period of time with a new limit attached to it. As such, this planned $23 Billion program will likely become much larger. Look at the recent unemployment benefit bill that causes so much contraversy this week. While it would be horrible to be unemployed and lose benefits after said period, are these extensions going to continue forever without actually cutting spending somewhere else in the budget? Each $10 Billion is more debt on our progeny.

So, with that in mind, I will certainly keep you informed as more details emerge, but for now, Cash for Caulkers is in the conceptual stage.

Expect more soon though. Perhaps the prospect of more free stuff will keep the public’s mind off the health care debate, right? If waiting until next year is too long and you want to do something about your energy prices this winter, you should also consider hedging your own energy prices.

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“the American taxpayer paid $24,000 per vehicle to execute the program”

That $24,000 number is pretty questionable. That makes it sound like they wasted almost $20,000 just to administer it. That is not the case. The people reporting that $24,000 figure are assuming most of the cars would have been sold anyway and then concluding the government only got its money worth on the additional car sales. I don’t think giving tax refunds to citizens is a “waste”. The government spent $3B on tax refunds for 700,000 cars.

Here’s the real question, how do you determine whether or not to participate?

We bought our home in 2007, so we weren’t eligible for that tax credit. Our cars weren’t eligible and I wouldn’t have traded them in anyway since they run well. We have never missed a payment on anything, so we weren’t eligible for any of those mini-”bailouts” either.

BUT, we do own a home so we could take advantage of Cash for Caulkers. Our home was built in 2004 and is already pretty energy efficient ($180 electricity bills during the worst part of a Houston summer). I’m wondering if it would even be worth it…

Plus, my husband and I are in our 20′s, so we are the progeny that’s going to shoulder this crap (let’s just say we wish none of these credits, including this one, were ever invented)…do we add to it by participating or ignore programs like this and just shoulder the debt from those that do take advantage?

I have an older home that could certainly use some insulation to become more energy efficient. I wouldn’t say this program is going to make me spend more money insulating but I’ll gladly take advantage of the savings.